Tuesday, October 20, 2009

According to a report at the WSJ Real Time Economics blog, there is now a third bill working its way through Congress that seeks to audit the Federal Reserve in an attempt to determine where all its newly created and borrowed money has gone over the last year while it was saving the global financial system from certain destruction.

Following HR 1207, the original "Audit the Fed" bill by Rep. Ron Paul (R-TX) that currently has an impressive 303 co-sponsors in the House of Representatives, this new watered-down bill from Jeff Merkley (D-OR) and Bob Corker (R-TN) joins one by Bernie Sanders (I-VT) in the Senate and already appears to be much more popular with Democrats than either of the other two because, according to the WSJ blog, it doesn't ask for company names or the type and quantity of "troubled" assets being exchanged for crisp, clean Federal Reserve Notes as part of the audit process.

The bill directs the GAO — the investigative arm of Congress — to audit emergency lending programs that aren’t already subject to government audits. (Institution-specific lending programs, such as those tied to AIG and Bear Stearns, are already open to GAO review, as are programs conducted jointly with the Treasury Department.)

To avoid disrupting markets, the legislation directs the GAO to redact from its reports the names of specific institutions using the programs and “identifying details regarding assets or collateral” held in the audited facilities. But that information would be released one year after each program is no longer used. The legislation specifically cites programs created under the Fed’s 13.3 authority, which allows central bank lending to any firm in “unusual and exigent” circumstances: the money market investor funding facility, the asset-backed commercial paper money market mutual fund liquidity facility, the term asset-backed securities loan facility, the primary dealer credit facility and the commercial paper funding facility.